Scorched by the dot-com bust, investors — venture capital and angel — abandoned early-stage investing with the swiftness of a fair-weather Falcons fan. Startups with no revenue — and often no product — were seen as not worth the hassle.

Fifteen years is a long time. Memories of imploding portfolio companies are being washed away by valuations frothier than Dom Perignon. Billion-dollar exits for capital-light Web startups (think Instagram and Whatsapp) have investors bellying back to the bar.

Startup fever is extending beyond the borders of the tech Shangri-La that is Silicon Valley. The excitement is palpable even in Atlanta — a town better known for M&A and CRE dealmaking.

In the past 15 months, several Atlanta early-stage funds have been announced, promising to put more than $150 million in capital to work. The new funds will help plug a historical weakness — early-stage capital — that has kept Atlanta’s tech industry from realizing its potential. Georgia Tech’s Enterprise Innovation Institute estimates that 92 cents of every venture capital dollar invested in Georgia companies comes from out of state.

Having access to a deeper pool of local capital means Atlanta tech startups will be able to adjust their businesses faster. More capital will encourage startups to “fail fast and fail often,” said Adam Ghetti, chanting the oft-repeated Silicon Valley mantra.

“More capital will mean more failures — the trick will be to recognize them as early as possible and refocus the teams and capital,” said Ghetti, founder of Ionic Security Inc., which raised $25 million from Kleiner Perkins Caufield & Byers, Google Ventures and Atlanta’s TechOperators this year. That deal reportedly valued the three-year-old startup at nearly $100 million.

Early-stage capital has a multiplier effect on building the next generation of tech companies.

“More money means more companies will get funded at the critical early stages, which will give some of them a greater likelihood of becoming profitable, or achieving growth milestones necessary to attract future capital,” said Glenn McGonnigle, general partner at TechOperators, an early-stage venture firm.

Local investment at the seed stage also increases the likelihood the company stays and grows in Atlanta. “We know that entrepreneurs will relocate to other states, if necessary, to secure funding,” McGonnigle said. “However, once a company has raised their first round from a local venture firm, they are very unlikely to relocate out of Georgia.”

Yet, the surge in capital threatens to exacerbate the “zombie” startup problem, where half-baked ideas limp along, fueled by inexperienced investors and community cheerleaders.

The Atlanta tech ecosystem’s problem is it’s “too darn nice,” serial entrepreneur Paul Judge proclaimed. “We try to make it so that everybody can have a startup.”

Silicon Valley churns out two or three billion-dollar companies a year, while Atlanta produces one a decade, Judge said. He suggests devoting capital and other resources to backing a few of the most promising startups. “We’re like Little League, where everybody gets a trophy,” Judge said. “Nobody’s having a conversation of ‘Who’s the next billion-dollar company?’ ”

“We may not hit our home runs as far as funds in Silicon Valley, but our batting average will be much higher,” said Jamie Hamilton, who is raising a $20 million fund aimed at early-stage tech companies.

Unmet need or herd mentality?

A confluence of factors — which extend far beyond the Midtown and Buckhead startup enclaves — is fueling investor interest in Atlanta startups.

While seed-stage investing is the highest risk, technology advancements are deleveraging some of that risk. The cost of software and mobile development has plummeted. Startups today subscribe to low-cost Amazon Web Services (a suite of cloud-based services), instead of investing in expensive servers and storage equipment.

People can build companies for a fraction of the cost it took, even two years ago, said Doug Spear, head of the emerging growth and venture capital practice at Nelson Mullins Riley & Scarborough LLP’s Atlanta office. “If you’re an investor, your risk goes down, because that early-stage [investment] can go further,” Spear said.

Accelerating valuations and stock market returns drive IPO activity — 85 venture-backed companies went public last year, the highest number since 2000, according to the MoneyTree Report.

A strong IPO market increases the paths to a liquidation event. “Now you can be acquired, or you can go public,” said Judge, chairman of Pindrop Security, which raised nearly $12 million from Citigroup and Andreessen Horowitz.

Some of the new capital directed at startups is flowing from entrepreneurs who have had successful exits and are reinvesting. Consider David Cummings, who sold his marketing automation firm, Pardot, for $95 million in 2012. Since then, Cummings has plowed a portion of that windfall into building infrastructure — capital and tech space — to nurture tomorrow’s tech industry.

TechOperators, backed by entrepreneurs with billion-dollar exits, is raising a $100 million fund aimed at early-stage companies. TechOperators launched its first fund in 2008.

Media headlines and lofty valuations have drawn the attention of more established venture firms that typically do later-stage deals.

“The big venture firms have realized that if you don’t get in on a hot company earlier, you may never get in,” said Jeff McConnell, CEO of Whisper Communications, a Georgia Tech mobile security spinoff.

As more angel investors coalesce into groups, their financial ability to do seed-stage rounds and have sufficient dry powder to do follow-on rounds have caused venture firms to do earlier-stage deals, so they are positioned to make the Series A and B bets, McConnell said.

Some growth-stage venture firms are swimming downstream, following the scent of opportunity. “It’s harder to find good growth equity deals where you can put a lot of money to work,” Spear said.

The surge in fundraising means that, for the first time, there will be competition in Atlanta for early-stage deals. That competition is good for startups, because it helps drive valuations and forces investors to do more than write checks.

“In Atlanta, the person with the checkbook was in control,” Judge said. “That’s not the case in the Valley, where investors have to fight to get into good deals.”

Attorney Jeffrey Leavitt shrugs off concerns of a “herd mentality” taking over startup funding in Atlanta.

There isn’t a sufficiently large, or efficient, market for early-stage capital to drive that kind of a rush, said Leavitt, who heads the tech practice at law firm DLA Piper LLP’s Atlanta office. The recent fundraising is “a genuine and legitimate recognition of a market need,” he said.

Even with the additional early-stage capital available, Atlanta’s ratio of such capital to large company generation sources is still too low, Leavitt said. “The capital is desperately needed to fund lots of the new startups germinating in local new company breeding grounds,” he said. “Lots of great ideas have not had sufficient funding in recent years.”

Judge likens today’s fundraising fervor to the condo market in the mid-2000s. “We are overbuilding seed funds to an extent,” he said.

Atlanta’s startup industry isn’t plagued by a capital shortage, as much as by a shortage in truly fundable companies, some argue.

The “walking zombies” shouldn’t be kept on life-support, “because they are eating up good engineers,” Judge said.

Instead of trying to build 600 startups in Atlanta, the city ought to focus on building five more blockbusters such as Internet Security Systems ($1.6 billion) or AirWatch ($1.5 billion), he said.

“Money follows great people working on big problems,” Ghetti added. “Atlanta is full of great people, but a lot of them are working on small problems.”

Who’s writing the checks?

Hoping to address that early-stage capital shortage, these four funds are raising a combined $150M+

EndGame Systems: Developed a Web-based malware detection service that helps corporations assess the security of their systems without depending on access to internal network traffic, or requiring any hardware or software installation.